Tax administration

This paper considers what safeguards are available and the extent to which the safeguards are adequate given the increased powers parliament is giving to HMRC.

We study household income inequality in both Great Britain and the United States and the interplay between labour market earnings and the tax system.

Understanding tax non-compliance and the effectiveness of strategies to tackle it is crucial for a modern tax authority. In this paper we study how and why audits impact reported tax in the years after audit - the dynamic effect - for individual income taxpayers.

This briefing note summarises new research on which types of people under-report the taxes they owe, and what effects audits have on government revenue.

This briefing note presents preliminary results from a study on value added tax (VAT) and tax compliance in the Indian state of West Bengal.

The simplest form of value added tax (VAT) – and the form often advocated by international organisations – is one with a broad base and a single (‘uniform’) rate. In practise, most countries exempt and/or apply lower VAT rates on certain categories of goods and services. In this note authors summarise the pros and cons of such ‘VAT rate differentiation’ that are highlighted in the economics and taxation literatures, paying particular attention to the applicability and relevance of each factor for low- and middle-income countries.

We examine the optimal auditing problem of a tax authority when taxpayers can choose both to evade and avoid. For a convex penalty function the incentive-compatibility constraints may bind for the richest taxpayer and at a positive level of both evasion and avoidance. The audit function is non-increasing in reported income, and is higher for progressive tax functions than for regressive tax functions. Higher marginal tax rates increase the incentives for non-compliance, overturning the well-known Yitzhaki paradox.

Response to Consultation October 2016

Is the international tax system fixed and fit for purpose or still in need of serious remedial action? Should we hold off on introducing further anti-avoidance measures until current policies have had time to work or forge ahead with fixing our broken system? Helen Miller, an associate director who runs the tax sector at IFS, explores these issues in Tax Journal.

We study extrinsic and intrinsic motivations for tax compliance in the context of a local church tax in Germany.

Between 2007–08 and 2009–10, total government receipts collapsed – they fell by over 9% in real terms and were 2% lower as a proportion of national income – largely as a result of the financial crisis and resulting recession. By the end of this decade, government receipts are forecast to be 37.2% of national income,2 a little lower than in 2007–08 (37.5%) but higher than in 2009–10 (35.8%) and 2015–16 (36.3%) and a little higher than the average level over the two decades before the recession (36.4%). On the face of it, these aggregate numbers imply that, by 2020–21, we will be more or less back where we started, raising around the same proportion of national income in revenue as just before the crisis. However, this masks considerable changes in the composition of receipts.

The taxation of high-income earners is of importance to every country and is the subject of a considerable amount of recent academic research. Such high-income earners contribute substantial amounts of tax and generate significant positive spillovers, but are also highly mobile: a 1% increase in the top marginal income tax rate increases out-migrations by around 1.5 to 3%. We review research into taxation of high-income earners to provide a synthesis of existing theoretical and empirical understanding. We offer various avenues for potential future theoretical and empirical research.

We develop a tax micro-simulator model (MEXTAX) that can quantify the revenue and distributional impact of tax reforms in Mexico using micro-level data. We use MEXTAX to assess revenue-raising reforms to Mexico’s direct and indirect tax systems of 2010.